of the Maritime University of Szczecin
Akademii Morskiej w Szczecinie
2019, 59 (131), 110–119ISSN 1733-8670 (Printed) Received: 25.07.2019
ISSN 2392-0378 (Online) Accepted: 05.09.2019
DOI: 10.17402/358 Published: 30.09.2019
Challenges and opportunities of the Maritime
Silk Road initiative for EU countries
Ewa Oziewicz, Joanna Bednarz
Uniwersytet Gdański, Wydział Ekonomiczny, Instytut Handlu Zagranicznego 119/121 Armii Krajowej St., 81-824 Sopot, Poland
e-mail: {ewa.oziewicz; joanna.bednarz}@ug.edu.pl
corresponding author
Key words: Maritime Silk Road, BRI, China, EU countries, FDI, blue economy, competitiveness Abstract
The Maritime Silk Road of the 21st Century (MSR) is one of the two largest and most ambitious projects
announced by Xi Jinping in 2013, under the current name, the Belt and Road Initiative. The main aim of this paper is to assess the opportunities and risks of the maritime portion of this project for EU countries. The au-thors would like to draw the attention of readers to the possible goals behind the MSR, especially now, when numerous doubts connected with the Chinese initiative have risen. The authors analyze the situation and the consequences of the MSR Initiative for European ports and shipping companies, as well as for other infrastruc-ture and sectors connected with seaborne trade as a part of the blue economy.
The MSR creates not only opportunities for developing a blue economy in EU countries, but also competitive risks. EU countries should keep in mind the growing importance of the blue economy for China (including marine industries, the exploitation of ocean resources, and services such as tourism and transport), especially since it already currently represents around 10% of Chinese GDP. It is also worth highlighting that the sea lanes of communication from China to Europe through the Malacca-Suez route are among the busiest in the world. Twenty-five percent of world trade passes through the Malacca Strait alone. This should convince EU countries to pay more attention to China’s activity at sea.
Introduction
China’s new position in the global economy has awoken its pride and willingness to become a lead-er of the global economy. For many years, the US insisted that China take more responsibility for the world economy and economic development. Chi-na has the second largest economy with respect to its nominal GDP and the highest GDP (PPP) in the world, and is now ready to lead the global economy and to become, if not a hegemon, a co-leader of the globe. This, to a great extent, was a consequence of the latest US President’s declarations about a new approach towards international organizations, dif-ferent global problems, and towards globalization itself. “America First” has become one of the first declarations of Donald Trump after his victory in the
2016 election. Soon after his speech on January 21, 2017, Zhang Jun, the head of the Chinese foreign ministry office of international economic affairs, publicly stated in Beijing, “If it’s necessary for Chi-na to play the role of a leader, then ChiChi-na must take on this responsibility” (Chin, 2017).
The withdrawal of Western nations from their leadership roles, and especially the abdication of the US as the world hegemon, has been the main fac-tor influencing this decision of Chinese leaders. The 2008 crisis and its slightly delayed negative effects on the Chinese economy forced China’s leaders to introduce the concept of the New Silk Road in 2013, also known as the Belt and Road Initiative (BRI). This megaproject, the most ambitious in modern his-tory, consists of two subprojects. One, called Belt, is a system of economic land corridors encompassing
roads, railroads, pipe connections, etc. linking China with Central and West Asia and further with Europe. The second – Road, whose name is Maritime Silk Road of the 21st Century (MSR) – is paving a
mar-itime way to Middle East, Africa, and Europe, and also to the South Pacific. The first subproject seems to be much more well-known, although MSR carries much greater economic and political implications for the world, allowing China to be more present in the world economy, as well as to play a more import-ant role in global policy.
The main aim of this article is to assess oppor-tunities and risks of the maritime part of the project for EU countries. The authors would like to draw the attention of the readers to the possible goals behind the Maritime Silk Road Initiative (MSRI), espe-cially now since numerous doubts and suspicions connected with the Chinese initiative have arisen. Many partners in the project have claimed that Chi-na undertakes projects which are beneficial for its own economy and, in the more distant future, for its international political standing.
One of the most important sectors within MSRI and the blue economy is maritime transport, but there are many other dimensions, including seaports, ship-building, fishing, tourism, sea mining, etc. Although these are all connected with the blue economy, the authors have chosen to concentrate on seaports and shipping.
Regarding the above goal, the authors have for-mulated three research questions:
• Should the European Union be worried about the rapid development of the Chinese naval power? • Is the Maritime Silk Road of the 21st Century
Ini-tiative an opportunity for EU economies?
• What are the threats to EU economies connected with MSRI?
The authors have also formulated two hypotheses:
H1: Chinese outward foreign direct investment
(OFDI) in the so-called blue economy, being
consistent with main theories on OFDI, is driv-en by special motives in the case of the Europe-an Union economies, which may create certain threats for the EU countries involved in BRI and especially in MSRI.
H2: The European Union economies can profit from Chinese OFDI in the member countries’ mari-time infrastructure within the MSRI.
Using different sources of data from numerous reports and literature on the subject, the authors have attempted to verify the above hypotheses.
Maritime Silk Road as a part of the Belt and Road Initiative
The idea of rejuvenating the ancient Silk Road was proposed by Chinese President Xi Jinping in 2013. He turned to Kazakh leaders with the idea of New Silk Road (its land part) to accelerate the devel-opment of Central Asia, as well as western Chinese provinces and to facilitate trade with Europe. While visiting Indonesia in 2013, he spoke about the mari-time portion of the project. The OBOR, or BRI con-cept has been described in many articles, so the ini-tiative is not presented in detail here. To read more about the Belt and Road Initiative, see (Johnston, 2019).
Although the concept was announced by Xi in only 2013 primarily under the name One Belt, One Road (OBOR), many of the infrastructural invest-ments over the Eurasian continent had begun much earlier. China began its Going Out policy at the beginning of the century, and then Chinese invest-ment in different parts of the world began. The entire project’s first name was One Belt, One Road, but it has since changed to the Belt and Road Initiative, positioning China in a role of initiator only, not the main leader. It is to soften the general view and to prevent any misconceptions that the infrastructure belongs to only one nation – China.
The main goals of the BRI are, on one hand, redrawing international trade routes between Asia (and of course China) and Europe. On the other hand, it seeks to shift from Western-style multilat-eralism to a mixture of bilatmultilat-eralism and multilateral negotiations, but this time with China as an initiator and, if not a leader, then one of the main players.
BRI is perceived as an attempt to create a bipolar (with the US and China as the dominant players) or multipolar (with other main powers: the EU, Japan, India) world order. Some researchers have stated that this is a way which will lead to a unipolar world with China as a hegemon. They try to compare the Chinese naval policy to the one once conducted by the US. If hegemony is the main goal of China, then the key problem is to follow the pattern of previous global powers. The first step is to dominate its neigh-borhood, before it can really dominate the world, as once the US first dominated the Western hemisphere and only then, began to think and act globally. Hav-ing global ambitions, China would have to solve many local problems first, which is time consum-ing. If managed properly, the BRI will certainly give China greater leverage over its neighbors and more influence.
China developed its economy thanks to the West-ern economic order and globalization which allowed the country to first use Western capital, investments, and technologies. In the next step, it become “the world factory”, and today it is ready to challenge this order and to form new global governance and restruc-ture globalization to give it Chinese characteristics.
Many countries along the Belt, as well as those on the MSR, need infrastructure investments, and they perceive Chinese engagement in the BRI as an opportunity for dynamizing their development and growth. Supported by Chinese leaders and convinced that the concept of the BRI is a win-win, many coun-tries have eagerly joined the project. Even during the last BRI Summit 2018, Xi Jinping strongly stressed that there was no hidden agenda in the whole proj-ect, and Chinese analysts systematically rejected the notion that global leadership is the most important objective of the project.
The Chinese economy has lately, after a few decades of very dynamic growth, started to slow down. This has resulted in certain consequences, including the overproduction of steel and concrete, idle capacity in these two sectors, as well as an increasingly demanding society, along with a dimin-ishing growth rate. The idea of rejuvenation of the Silk Road seems perfect in such conditions, allow-ing China to use this idle capacity and create new markets for Chinese products, while simultaneously
safeguarding the supply of raw materials for Chinese industries.
Recent years have brought one more idea for accelerating Chinese trade with Europe. That is the Arctic Silk Road that would accompany MSR and connect Chinese ports with this continent via a North-ern route. Figure 1 presents the basic BRI routes.
The BRI spans three continents, directly engaging over 60% of the world’s population. In fact, it now spans four continents, since in the last five years, the BRI has expanded its scope and now reaches South America. Panama was the first country in the region to sign an agreement with China within the BRI (Koop, 2019). The maritime part of the BRI – MSR – is an initiative to build infrastructure connected with sea transport – ports and safe and efficient sea routes connecting main ports situated along the BRI – as well as the hinterland of the ports. The MSR passes through a region that is home to 42% of the world’s population and 25% of its GDP, excluding China (Baker McKenzie, 2017).
Theoretical background and literature review
The Chinese economy has, to a great extent, grown thanks to inward foreign direct investments, and by taking all the possible positive consequenc-es of the inflow of capital and technology from the
West. Today’s China has evolved into the top coun-try as far as OFDI is concerned. Dunning’s tradition-al investment development path theory (IDP), was launched in the 1980s and is related to developed countries (Dunning, 1986). However, with changes in the global economy, the theory has had to change as well. This dynamic approach has been presented in Dunning and Narula’s article (Dunning & Narula, 1993) as an extended IDP.
One of the theories that could be also applied in the case of current Chinese investment activity is ambidexterity theory, which highlights the unique strategic behavior of transnational enterprises from emerging markets (Luo & Rui, 2009). Another that can be quoted is the global mindset perspective, which stresses the ability of an individual to adapt to globalization processes, to be conscious of differ-ences, and to have the vision and power to “infect” others with the concept of internationalization (Gup-ta & Govindarajan, 2002; Bieliński, Markiewicz & Oziewicz, 2019).
Discussing the OFDI, one should not forget that economic and political factors are intertwined, which is especially apparent while researching economies with different systems, e.g., China. One of the theo-retical approaches to this problem is Baldwin’s polit-ical theory of economic statecraft (Baldwin, 1985), which joins economic and political elements by not-ing that a certain country may achieve foreign policy goals using economic means. This theory appeals especially to states trying to influence the behavior of other states. One of these such tools is FDI flow (Pardo, 2018).
Another theory which could be recalled hare is navalism. It defines the power and position of a country on an international forum based on its fleet, which includes its navy as well as its marine merchant fleet. In the past, China has been very hermitic, but it has recently shown some change to this approach. At the beginning of the 15th century,
the Chinese fleet was the most imposing one. Chi-nese admiral Zheng He – commander-in-chief on behalf of the Chinese emperor – led seven cruises to Asia and Africa, expanding friendly ties with other nations, east-west trade opportunities, and China’s political influence in the world. After those voyag-es, a new Chinese emperor decided to suspend fur-ther expeditions and ordered the destruction of the fleet, returning to Chinese isolationist policy (Drey-er, 2007). China, with its policy towards the South China Sea and increasing its armament expenses, has especially modernized its navy, and is trying to obtain a strong position on the seas.
It has reached the point in which it is impossible to cut off relations between the EU and China, and if this were to occur, there would be a huge increase in costs. EU economies would have to make difficult choices, to either accept some of these costs, give up some profits, or make other economic and financial sacrifices, in exchange for national security. Accord-ing to T. Yoshihara from the US Naval War College, it is in the interest of EU countries to be cautious with further engagement and deeper cooperation with China (Chiński Sen – Chinese Dream, 2019).
Discussing the BRI and Chinese motives behind this initiative, there are three basic concepts per-ceived by researchers as the main reason that has pushed Xi Jinping and China to engage with the ini-tiative. The whole project is either a kind of Marshall Plan for Asia (Yakobashvili 2013), or a new wave of globalization with Chinese characteristics (Hender-son, Appelbaum & Suet Ying, 2013). It is also seen as Chinese expansion in an attempt to dominate the world (Yoshihara & Holmes, 2018). Still, it is simply seen as a business opportunity by many companies. In fact, the reality is more complicated than that.
The first concept is strongly rejected by China, although its leaders stress the will of helping other Asian countries develop their economies. The finan-cial means invested in those economies are not giv-en, but rather borrowed from China, which places some constraints on the countries along the Road and Belt (e.g., the Hambantota in Sri Lanka and Gwadar in Pakistan, where protests of local societies have shown their discontent).
As far as Chinese expansion is concerned, this approach seems to be doubtful in the contempo-rary world, which is multipolar and, as Cabañas – a researcher from an Argentina-based think-tank – states, “No smart country would be aligned with a single power; rather, the countries try to maintain links with all the great powers, hoping to get the most advantage possible” (Cabañas, 2019). Such an approach seems exaggerated.
Moreover, Chinese assertive policy, as far as the territorial disputes around the South China and the East China Seas are concerned, actions connected with gaining certain influences in different parts of the world could awaken suspicions about China’s true intentions. One of the evidences of such an assertive policy are the artificial islands on the South China Sea built by the Chinese.
Another theory that could be quoted here and is somehow connected with the third approach to the project, is the network theory. On the one hand, net-working offers benefits, such as investments needed
in many developing – but also developed – coun-tries. On the other hand, it has negative elements, such as relationships created within the network that can also carry binding obligations, making the host countries dependent on the investors. In this situa-tion, countries hosting foreign investments are blind-ed by the possibility and become trappblind-ed by debt, as has happened with Hambantota Port in Sri Lanka. Critics of the BRI say that it is an effort to strength-en Chinese influstrength-ence around the world by financially binding countries to China by so called “debt trap diplomacy”. This has caused growing international criticism, and some countries have begun to rethink their attitude towards the BRI.
When debating the motives behind the participa-tion of different partners in the MSR, different theo-ries should be applied, and one must remember that they do not necessarily replace each other. Rather, they include many phenomena: economic, political, ecological, among others, so it is recommended to use different theories which are not opposed to each other, but rather complementary.
Chinese foreign direct investment in the EU with special reference to MSRI
Based on the data provided by the World Invest-ment Report (World InvestInvest-ment Report, 2018), China is the third largest source of foreign direct investment (FDI) outflows worldwide (after USA and Japan). The outward and inward flows of Chi-nese FDI have tended to grow, interspersed with short periods of decline. After a decade of this rapid growth, China’s investments abroad declined sharp-ly in 2016 (Figure 2).
The peak of Chinese FDI in Europe was in 2016, when the value of transactions was 37 bn EUR. Chi-nese OFDI continued to decline in 2018, and its val-ue was 17.3 bn EUR – a decline of about 50% from its 2016 peak (Hanemann, Huotari & Kratz, 2019).
The highest cumulative value of the Chinese invest-ments from 2000–2018 was concentrated in the UK (46.9 bn EUR), Germany (22.2 bn EUR), Italy (15.3 bn EUR), and France (14.3 bn EUR).
Compared with previous years, the industrial investment in 2018 by Chinese enterprises in Europe was remarkably more diverse. In 2016 and 2017, FDI concentrated mostly on two sectors: transport, utili-ties and infrastructure, as well as ICT. The value of the investment was 13.9 bn EUR in 2017 (Figure 3).
Since 2016 there has been a sudden increase in Chinese investment in seaport management. So far, China has invested in 13 EU ports along the Medi-terranean Sea, as well as in northern parts of Europe. These included greenfield and financial investments in European ports in Spain (Bilbao and Valencia), the Netherlands (Rotterdam), Belgium (Bruge, Ant-werp), Italy (Genoa), France (Marseille, Le Havre, Dunkirk, Nantes), Malta (Masaxlokk), Lithuania (Klaipeda), and Greece (Piraeus) (Hache & Mérig-ot, 2017). These ports handle about 10% of Europe’s shipping container capacity.
The investment needs of European ports, espe-cially after the financial crisis of 2008 and the Euro crisis, have been huge, so ports eagerly accepted the influx of capital. The Chinese state-owned enter-prises COSCO Shipping Ports and China Merchants Port Holdings have acquired stakes, stating that such an investment is more profitable than shipping itself. It is worth mentioning the most important examples of China’s investment in European ports (Seaman, Huotari & Otero-Iglesias, 2017) include:
• COSCO purchasing 25% of the Port of Antwerp’s container terminal for EUR 150 mn in 2004; • COSCO and Shanghai International Port Group
first acquired 49% of the container terminal of Zeebrugge in 2014, and then announced the acqui-sition of the entire terminal in September 2017; • In Greece, after signing a 831.2 mn EUR
con-cession agreement in 2008, COSCO purchased
0 50 000 100 000 150 000 200 000 250 000 300 000 350 000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
FDI outward flows FDI inward flows
a 51% stake in the Piraeus Port Authority in 2016 for 280.5 mn EUR, representing a price of 22 EUR per share.
Particular attention should be paid to the port of Piraeus and the ports in Italy. The Chinese presence in these countries is aimed at the construction of a cross-border transport corridor from the Mediter-ranean to Central Europe. This corridor will allow China to realize two strategically important goals: the reduction of transportation costs and improved access to and an increased presence in the Europe-an market (SeamEurope-an, Huotari & Otero-Iglesias, 2017; Tonchev, 2017). Piraeus, called a Chinese gate to Europe, decreased the shipping times of Chinese goods by one week. Moreover, Chinese investors have already expressed their interest in funding the Rovaniemi-Kirkenes railway and the Helsinki-Tal-linn tunnel project, which would connect the Arctic with the EU. Chinese shipping company COSCO is interested in summer connections along the Arctic Silk Road, which, together with the Chinese invest-ment in a railway connecting the port of Piraeus with Central and Eastern Europe, would create a circle closing the Belt and Road (Descamps, 2019) and
link the Mediterranean Sea with the Arctic Ocean (Figure 1).
Competitiveness of Chinese maritime transport and infrastructure
Extensive and efficient infrastructure is critical to ensure the effective functioning of the economy. The overall rank and quality of Chinese port infra-structure have significantly improved since 2009, in areas including: road connectivity and quality, rail-road density, efficiency of train services, airport con-nectivity, efficiency of air transport services, liner shipping connectivity, efficiency of seaport services, electrification rate, electric power transmission and distribution, losses exposure to unsafe drink-ing water, and reliability of water supplies. In the latest ranking of Global Competitiveness Report 2018/2019 China respectively took the 47th and 49th
positions (Table 1).
China is the best-connected economy to the global liner shipping network in 2019 and is con-stantly increasing this connectivity, as measured by the UNCTAD liner shipping connectivity index.
Figure 3. Chinese FDI in the EU by sectors in 2010–2018, EUR bn (Hanemann, Huotari & Kratz, 2019)
Table 1. China – quality of overall infrastructure and quality of port infrastructure from 2009 to 2019 (Schwab, 2019)
2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2018/2019 Number of countries in the ranking 133 139 142 144 148 144 140 138 137 Quality of overall infrastructure – rank 69 72 69 69 74 61 51 43 47 Quality of port infrastructure – rank 61 69 56 59 59 53 50 43 49
The UNCTAD Liner Shipping Connectivity Index assesses a country’s connectivity to global ship-ping networks. It is based on five components of the maritime transport sector: the number of ships, their container-carrying capacity, the maximum ves-sel size, the number of services, and the number of companies that deploy container ships in a country’s ports. From 2006–2019, the dynamic of this index increased to 52%. Next in the ranking following China are: Singapore, the Republic of Korea, Malay-sia, USA, Hong Kong, Belgium, the Netherlands, the United Kingdom and Spain. Of these, only the US does not participate in the MSR project. China is relatively well-connected to Europe (especially Bel-gium and Spain), as well as to Eastern and Southeast Asian countries.
China has the highest rank when considering its container port throughput is more than four times that of the USA – the second country in the ranking – as well as other countries like Singapore, Republic of Korea, Malaysia, and Japan. Among the EU coun-tries, the best results were achieved with Germany (11 times weaker result than China), Spain, Neth-erlands, Belgium, Italy, the United Kingdom, and France (32 times weaker result than China).
When considering the efficiency of seaport ser-vices by measuring the frequency, punctuality, speed, and level of price, the executive opinion survey of the World Economic Forum ranked China as num-ber 49. The world leaders are Singapore, the Neth-erlands, Finland, Hong Kong, USA, Denmark, Pa- nama, Japan, Belgium, and Estonia (Schwab, 2018).
The logistics performance index (LPI) is the weighted average of the country scores on six key dimensions: (1) efficiency of the clearance process (i.e., speed, simplicity and predictability of formali-ties) by border control agencies, including customs; (2) quality of trade and transport-related infrastruc-ture (e.g., ports, railroads, roads, information tech-nology); (3) ease of arranging competitively-priced shipments; (4) competence and quality of logistics
services (e.g., transport operators, customs bro-kers); (5) ability to track and trace consignments; (6) timeliness of shipments in reaching their destina-tion within the scheduled or expected delivery time. Compared with 5 leading countries in this ranking, China has a relatively good position in related infra-structure and ease of arranging competitive interna-tional shipments. Its weakest position was associat-ed with the efficiency of the clearance process (Table 2). A challenge for China is that it is surrounded by several economies with low perceived logistics per-formance (World Bank, 2018).
In the area of competitiveness of maritime trans-port and infrastructure, China’s assessment com-pared with EU countries is high, especially when consideration liner shipping connectivity index and container port throughput. There is still a significant gap where EU countries are more competitive than China. These areas are: efficiency of the clearance process, competence and quality of logistics ser-vices, timeliness of shipments in reaching destina-tion, as well as the ability to track and trace consign-ments. However, it should be notes that over the last decade, China has improved its position especially in: the quality of trade and transport-related infra-structure, ease of arranging competitively priced shipments, and timeliness of shipments (in 2007 the positions were respectively 30, 28, and 36) (World Bank, 2007).
MSRI – possibilities and threats for the EU economies
Should Europe be uneasy about the rapid devel-opment of Chinese marine power? There are differ-ent points of view and differdiffer-ent approaches towards this question.
There is no doubt that the marine routes in Europe have changed. In 1990s of the last centu-ry, the transpacific route controlled 53% of global traffic, while transport through the Suez Canal and
Table 2. Logistics Performance Index 2018 (World Bank, 2018)
Country LPI Rank Customs Infrastructure International shipments competenceLogistics & tracingTracking Timeliness
Germany 1 1 1 4 1 2 3 Sweden 2 2 3 2 10 17 7 Belgium 3 14 14 1 2 9 1 Netherlands 6 5 4 11 5 11 11 Singapore 7 6 6 15 3 8 6 China 26 31 20 18 27 27 27 Poland 28 33 35 12 29 31 23
the Mediterranean Sea accounted for 27%. Twenty years later, in 2015, those proportions levelled out as the Europe-Far East route currently controls 42% of global traffic, vis à-vis the 44% controlled by the transpacific route. At the same time, the volume of traffic crossing the Suez Canal jumped 124%, with the Mediterranean controlling 10% of global trade (Fardella & Prodi, 2017).
Moreover, seaborne trade plays a significant role in economic relations between China and EU countries. In 2016, 64% of EU-China goods trade (in volume) was transported by sea, compared with 2.06% by rail, 6.35% by road, and 27.59% by air (Duchâtel & Sheldon-Duplaix, 2018). From the EU perspective, the MSRI is much more important than land routes while also considering the transportation costs. The cost of shipping by sea from Shanghai to a Mediterranean port is 797 USD and to north desti-nations is 912 USD per 40-foot container. The cost to ship a container by train is around 1000 USD, which is achieved only because of heavy subsidies of Chinese local authorities; the real cost can reach 5000 USD (Duchâtel & Sheldon-Duplaix, 2018).
The Belt and Road Initiative will give a new push to further develop the Chinese economy. The goal of the MSRI itself is to push the so-called blue econo-my, which is widely understood as the exploitation and preservation of marine environments. The blue economy was said to create 10% of Chinese GDP in 2016 (if it were a country – it would have been the 15th-largest economy in the world). While speaking
about blue economy and China-EU relations, Chi-nese policies on further developing its blue econo-my are transforming the maritime environment in which Europeans have been operating. So, as both parties await security and prosperity, this sector can create opportunities for them. Europe should follow the Chinese approach towards the blue economy and also use it as an engine of growth, by demanding that China operate on a reciprocal basis.
The MSRI also creates many challenges for EU economies which are connected with the fleet, port throughput, carbon footprint, and current and alternative routing schedules from Chinese ports to Europe. There will also be competitive advantages as far as the field of shipbuilding is concerned. How-ever, this initiative requires strong cooperation (Bed-narz & Markiewicz, 2015) between countries on a trans-continental scale. It is necessary for countries to cooperate, especially to improve trade facilitation and border management, unify standards in building infrastructure, agree on legal standards and investor protections that will encourage further investment
along BRI corridors, and manage environmen-tal risks (World Bank, 2019). As an example, it is worth mentioning that infrastructure improvements, combined with reductions in border delays, will increase trade by more than 10% for regions such as Central and Western Asia and the Middle East and North Africa. In the same way, when consider-ing BRI intervention along all economic corridors, countries from Sub-Saharan Africa and Central and Western Asia will benefit the most (de Soyres et al., 2018). Improving connectivity and reducing delays will positively influence the trade of time‐sensitive products and quality-sensitive food products, since timely delivery is highly valued by producers in both situations. In this sense, the “win-win” strategy proposed by China can be realized, as all of them will fully benefit from the positive spillovers form development. From this point of view, it is possi-ble to positively verify Hypothesis 2, and state that European Union economies can profit from Chinese OFDI located in the member countries’ maritime infrastructure within the MSRI.
Hypothesis 2 was also verified, which asserts that Chinese OFDI in the so-called blue economy, consistent with main theories on OFDI, is driven by special motives in the case of the European Union economies. This may create certain threats for EU countries involved in the BRI and especially in the MSRI. In Europe there are experts that argue that the “win-win” strategy is only a slogan, as the BRI and MSRI are geopolitical projects associated with Chinese power and influence in an attempt to dom-inate international politics and achieve the goal of becoming a leading force in the world.
An argument that specialist in the EU point-ed out and criticizpoint-ed the Chinese agreement with Greece on overtaking the port of Piraeus and the ease with which the Chinese managed to do this. They highlighted that Chinese investment in such strategic places like ports should be restricted to a certain level. This, among other FDI transactions, mobilized the EU to put in place an EU-wide frame-work for foreign investment screening in November 2018 (European Commission, 2018). It has already impacted Chinese investment patterns (as presented in Figures 2 and 3). More complex regulations for inbound investments are probably only the first step in a broader overhaul of Europe’s policy towards trade and investment with China. Other reforms, such as export controls for dual use and critical tech-nologies, data security, and privacy rules, procure-ment rules, and competition policy, have also been considered (Hanemann, Huotari & Kratz, 2019).
Another major challenge for EU economies and China is to implement accepted unique rules on state aid. This problem concerns, among others, substan-tial subsidies of Chinese local authorities to achieve competitive prices to ship a container by train. This requires preserving transparency to reduce asymme-tries on the market for state aid.
Furthermore, Duchâtel and Sheldon-Duplaix (Duchâtel & Sheldon-Duplaix, 2018) argue that Europe does not have much to gain from the Mari-time Silk Road, except for investment in port infra-structure. European companies are good alterna-tives to Chinese investments, which was shown by the recent privatization of the port of Thessaloniki, sold to a consortium of French, German, and Rus-so-Greek companies for 1.1 bn EUR.
Conclusions
Debating the motives behind the participation of different partners in the MSR, different theories should be applied, and one must remember that they include economic, political, and ecological aspects. Therefore, it is recommended to use different theo-ries which will be complementary.
MSRI, as a part of the BRI, represents challenges, opportunities, and risks common in large infrastruc-ture projects. This could significantly improve trade, FDI, and living conditions of citizens in the coun-tries joining the initiative. However, it requires the adoption of deep policy reforms that increase trans-parency, open the initiative, expand trade, improve debt sustainability, and mitigate environmental, social, and corruption risks (World Bank, 2019).
Participation in such a large infrastructure project requires the cooperation of all participating coun-tries on a trans-continental scale in many different areas. Nevertheless, it seems that nowadays MRS creates more competition than cooperation oppor-tunities in Europe-China relations. Chinese actions have already affected European interests in five main areas: maritime trade, shipbuilding, emerging growth niches in the blue economy, the global presence of the Chinese navy, geopolitics, and the global compe-tition for influence. Therefore, it requires continued capital controls as well as growing regulatory scru-tiny in host economies. More complex regulations for inbound investments are probably only the first step in a broader overhaul of Europe’s policy towards trade and investment with China. Other reforms, such as export controls for dual use and critical technol-ogies, data security and privacy rules, procurement rules, and competition policy, are considered.
References
1. Baker Mckenzie (2017) Silk Road Associates, Belt & Road:
Opportunity & Risk. The prospects and perils of building China’s New Silk Road. [Online] Available from: https://
www.bakermckenzie.com/-/media/files/insight/publica- tions/2017/10/belt-road/baker_mckenzie_belt_road_re-port_2017.pdf?la=en [Accessed: July 15, 2019].
2. Baldwin, D.A. (1985) Economic statecraft. Princeton: Princeton University Press.
3. Bednarz, J. & Markiewicz, M. (2015) From confrontation to cooperation – institutional support in building coopera-tion of Polish enterprise’s. Oeconomia Copernicana 6, 3, pp. 89–116.
4. Bieliński, T., Markiewicz, M. & Oziewicz, E. (2019) Do Central and Eastern Europe Countries Play a Role in the Belt and Road Initiative? The Case of Chinese OFDI into the CEE–16 Countries. Comparative Economic Research.
Central and Eastern Europe 22, 2, pp. 7–22.
5. Cabañas, J.M.G. (2019) Old Roads and New Paradigms:
On the Last BRI Summit – OpEd. [Online] May 1. Available
from: https://www.eurasiareview.com/ [Accessed: July 20, 2019].
6. Chin, J. (2017) China Says Prepared to Lead Global Econo-my if Necessary. The Wall Street Journal, January 23. 7. Chiński Sen (2019) Chiński Sen króluje na morzu (część 1).
Z prof. Toshim Yoshiharą rozmawia J. Piekutowski.
[On-line] May 10. Available from: https://nowakonfederacja.pl/ chinski-sen-kroluje-na-morzu-czesc-1/ [Accessed: July 14, 2019].
8. De Soyres, F., Mulabdic, A., Murray, S., Rocha, R. & Ruta, M. (2018) How Much Will the Belt and Road
Ini-tiative Reduce Trade Costs? World Bank, Policy Research
Working Paper 8614, October.
9. Descamps, M. (2019) The Ice Silk Road: Is China a
‘Near-Arctic-State’? [Online] February. Available from: www.
isdp.eu [Accessed: July 19, 2019].
10. Dreyer, E.L. (2007) Zheng He. China and the Oceans in
the Early Ming Dynasty, 1405–1433. New York: Pearson
Education, Inc.
11. Duchâtel, M. & Sheldon-Duplaix, A. (2018) Blue
Chi-na: Navigating the Maritime Silk Road to Europe. [Online]
April 23. Available from: www.ecfr.eu [Accessed: July 20, 2019].
12. Dunning, J.H. & Narula, R. (1993) Transpacific Foreign
Direct Investment and the Investment Development.
[On-line] September. Available from: https://www.merit.unu. edu/publications/rmpdf/1993/rm1993-024.pdf [Accessed: July 12, 2019].
13. Dunning, J.H. (1986) The Investment Development Cycle Revisited. Weltwirtschaftliches Archiv 122, pp. 667–676. 14. European Commission (2018) Press release, Commission
welcomes agreement on foreign investment screening frame-work. Brussels, 20 November 2018.
15. Fardella, E. & Prodi, G. (2017) The Belt and Road Ini-tiative Impact on Europe: An Italian Perspective. China &
World Economy 25, 5, pp. 125–138.
16. Gupta, A.K. & Govindarajan, V. (2002) Cultivating a global mindset. Academy of Management Executive 16 (1), pp. 116–126.
17. Hache, E. & Mérigot, K. (2017) Belt and Road Initiative: The Geoeconomics of Port Infrastructures. Revue
Interna-tionale et Stratégique 107, Transport and Infrastructures, pp.
18. Hanemann, T., Huotari, M. & Kratz, A. (2019) Chinese
FDI in Europe: 2018 trends and impact of new screening policies. A report by Rhodium Group (RHG) and the
Merca-tor Institute for China Studies (MERICS). [Online] March. Available from: https://www.merics.org/en [Accessed: July 10, 2019].
19. Henderson, J., Appelbaum, R.P. & Suet Ying, H. (2013) Characteristics: Externalization, Dynamics and Transforma-tions. Development and Change 44(6), pp. 1221–1253. 20. Johnston, L.A. (2019) The Belt and Road Initiative: What
is in it for China? Asia and the Pacific Policy Studies 6, 1, Australian National University, pp. 40–58.
21. Koop, F. (2019) Belt and Road: The new face of China in
Latin America. [Online] April 25. Available from: https://
dialogochino.net/26121-belt-and-road-the-new-face-of-chi-na-in-latin-america/ [Accessed: July 18, 2019].
22. Luo, Y. & Rui, H. (2009) An Ambidexterity Perspective To-ward Multinational Enterprises from Emerging Economies.
Academy of Management Perspectives 23, 4.
23. OECD (2019) FDI in figures. [Online] April. Available from: http://www.oecd.org/investment/FDI-in-Figures-April-2019.pdf [Accessed: July 10, 2019].
24. Pardo, R.P. (2018) Europe’s financial security and Chinese economic statecraft: the case of the Belt and Road Initiative.
Asia Europe Journal 16, pp. 237–250.
25. Schwab, K. (2018) The Global Competitiveness Report 4.0. World Economic Forum.
26. Schwab, K. (2019) Global Competitiveness Reports
2009/2010–2018/2019. World Economic Forum.
27. Seaman, J., Huotari, M. & Otero-Iglesias, M. (2017)
Chinese Investment in Europe. A Country-Level Approach.
ETNC Report, December 2017. [Online] Available from: https://www.ifri.org/sites/default/files/atoms/files/etnc_re-ports_2017_final_20dec2017.pdf [Accessed: July 22, 2019]. 28. Tonchev, P. (2017) China’s Road: into the Western Balkans.
European Union Institute for Security Studies (EUISS), February. [Online] Available from: https://www.iss.euro- pa.eu/sites/default/files/EUISSFiles/Brief%203%20Chi-na%27s%20Silk%20Road.pdf [Accessed: July 22, 2019]. 29. UNCTADstat (2019) [Online] Available from:
https://unct- adstat.unctad.org/wds/ReportFolders/reportFolders.aspx-?sCS_ChosenLang=en [Accessed: July 15, 2019].
30. World Bank (2007, 2018) Logistics Performance Index 2007 and 2018. [Online] Available from: https://lpi.world-bank.org/international/global [Accessed: July 22, 2019]. 31. World Bank (2019) International Bank for Reconstruction
and Development. Belt and Road Economics: Opportunities and Risks of Transport Corridors. Washington DC.
32. World Investment Report (2018) Investment and New In-dustrial Policies. Key Messages and Overview. UNCTAD, New York and Geneva.
33. Yakobashvili, T. (2013) A Chinese Marshall Plan for Cen-tral Asia? [Online] 16 October. Available from: http://www. cacianalyst.org/publications/analytical-articles/item/12838-a-chinese-marshall [Accessed: July 17, 2019].
34. Yoshihara, T. & Holmes, J.R. (2018) Red Star over the
Pacific. Revised Edition: China’s Rise and the Challenge to
U.S. Maritime Strategy. Annapolis, Meryland: Naval Institute Press.
